Elon Musk Responds to ‘Big Short’ Michael Burry’s Warnings

The billionaire, like many retail investors, closely follows the warnings of the legendary investor.

Elon Musk and Michael Burry are among the major influencers, each with hordes of followers on social media. 

Musk, who is the CEO of Tesla  (TSLA) – Get Free Report and the owner of Twitter, has seen his influence grow in recent months. He has become a global CEO, famous for his technological innovations, his ambitions to colonize Mars and his proximity to average people. 

Burry, founder of the hedge fund Scion Asset Management, is a Wall Street legend. His comments on the markets are closely followed by millions of retail investors who are looking for hints to make their investments grow.

The two personalities prefer to express themselves on social networks rather than in the media. They like to deliver their messages directly. 

But one of the big differences between them is that Burry delivers mostly bad news. And that bad news is about the markets, which, unsurprisingly, often triggers a lot of anxiety among investors.

Burry Left Twitter After Issuing a Dire Warning

For example, last month Burry urged investors to liquidate their shares by posting a one-word message: “Sell.”

The message unequivocally suggested that the financier was betting on a stock market crash when, since the start of the year, the stock market indices had been on a continuous rise.

Burry also deleted his account, leaving users to guess what he meant by “sell.” 

His message came the day before a Federal Reserve monetary-policy decision on interest rates.

The Federal Reserve decided to increase its the federal funds rate by 25 basis points (0.25 percentage point) to a range of 4.5% to 4.75%, the highest since 2008. The central bank also said more increases would be needed to bring inflation more closely, and more consistently, toward its 2% target. 

This increase, smaller than previous ones, seemed to suggest that the central bank felt well positioned in its fight against inflation.

Contrary to Burry’s advice, investors did not sell. Quite the opposite: The S&P 500 Index ended the day up more than 1%.

And the S&P 500 ended January with a 6.2% gain, the best start to a year since 2019, while the Nasdaq 100 jumped nearly 11% for its best January since 2001. 

Burry Is Back on Twitter With a Dire Warning

Seven days after deleting his Twitter account, Burry returned to the platform. And in his luggage he carried another terrible warning. 

The financier on Feb. 7 posted a  message that read: “This time is different.” It was accompanied by a graph comparing the effective federal funds rate and the S&P 500 Index in 2001 and 2002. 

The evolution curves show that the decline of the federal funds rate is parallel to that of the stock market index. Basically, for Burry a pivot in monetary policy — cuts in the federal-funds rate — should cause markets to fall, not to rise as many investors are currently anticipating.

As a result, the “This time is different” remark appears to be sarcasm. Burry seems to say that he does not understand why this time a reduction of interest rates would be accompanied by a rise in stock market indices, while the 2001-2002 economic context is similar to 2022-2023.

The return of the legendary financier on Twitter and his dire predictions are generating many reactions. Musk did not hesitate to comment. The billionaire says he’d rather smile at Burry’s warnings than anything else.

“Michael Burry has reactivated his Twitter account after saying ‘Sell’ and has now tweeted,” a Twitter user posted on Feb.7, referring to the investor’s message.

“Cracks me up every time 🤣,” Musk responded with a laughing emoji.

Musk and Burry have history. Scion Asset Management held put options — bearish bets — against nearly 1.1 million Tesla shares at the end of June 2021. It exited the position three months later.

In November 2021, Burry accused Musk of selling his company’s stock to service his personal debts.

“Burry is a broken clock,” Musk responded at the time. 

But Musk didn’t often take Burry’s criticism the wrong way. Back in April, when the investor sarcastically claimed that Musk’s acquisition of Twitter shares might be good for America, the tech mogul responded with a good-natured quip. 

Burry said it was his last tweet with a blue check mark. (Burry’s Twitter account does not have a blue check mark to authenticate the identity of the author.)

Since last September, the relations between Burry and Musk seem to have warmed, as the investor revealed that he was no longer shorting Tesla, even though he said he should be.

“If I am tweeting this you can bet I am not short it,” he said. “But I should be.”

The tweets were deleted.

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